the bottom line: 2018 articles archive home
 
Dream on
I pop my head outside the window to look at the ocean. I’m doing my 30 minutes of “work”, making sure that my orders are being correctly processed on the server in London. I could have done it earlier, but I decided to go for a walk on the beach instead, and afterwards I stopped at El Mercado for a Café con leche. Later I’ll go cycling and take the dog for a walk in the mountains.
Tuesday, December 11, 2018 ... more
 
 
Schwager on trading
One of my favourite one-liners on the markets is Jack Schwager’s, “There are a million ways to make money in the markets. The irony is that they are all very difficult to find.” Schwager, probably best known as the author of the Market Wizards series of books, started out trading on fundamentals before he transitioned to being a technical trader.
Tuesday, December 4, 2018 ... more
 
 
Markets 101
Wall Street wisdom, such as it is, largely revolves around a few eternal quandaries. And because they are never settled in one direction or the other, investment pundits thrive by dispensing conspicuously contradictory advice. According to some, for example, investors should cut their losses and allow their profits to run. While from others comes the warning that the greedy quickly become the needy.
Tuesday, November 27, 2018 ... more
 
 
Misoponos
What follows is the retelling (the full version) of a true story first told (only in part) by Greg Lukianoff and Jonathan Haidt in their book, The Coddling of the American Mind. How Good Intentions and Bad Ideas Are Setting Up a Generation for Failure
Tuesday, November 20, 2018 ... more
 
 
More Munger
It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking - it's like ants to sugar. There are huge incentives for a man to take up money management as opposed to, say, physics, and it's a lot easier.
Tuesday, November 13, 2018 ... more
 
 
What next?
“We have a tendency to lose the ability to put any given week or month into the broader context,” says Barry Ritholtz. “As an example, last year was a tremendous year with markets up over 20%, with little volatility. We never know when that’s going to end, but typically we do see some regression to the mean
Tuesday, November 6, 2018 ... more
 
 
Buying dividends
Russ Gremel recently donated $2.1m of Walgreen stock to a wildlife refuge - having acquired the shares about 70 years ago for $1,000. Walgreen has kept growing over the years, and by the time Gremel parted with his shares they were generating $42,000 in annual dividend income – that’s 42 times their original cost, every year.
Tuesday, October 30, 2018 ... more
 
 
Timing markets
We’re repeatedly told that only fools try to time the markets. “But we have found, and research shows, that most outperformance is achieved in bear markets,” said Trevor Garvin, Head of Multi-Management at Nedgroup Investments in 2015. “That if you can protect capital in falling markets, even though you might not get all the upside of a market, over time you will end up doing far better as you are coming off a higher base.”
Tuesday, October 23, 2018 ... more
 
 
Nassim Taleb
Nassim Nicholas Taleb is the idiosyncratic author of INCERTO “a philosophical and practical essay on uncertainty” that consists of Skin In the Game, Antifragile , The Black Swan, Fooled by Randomness and The Bed of Procrustes a (so far) 5-volume, in his words, "investigation of opacity, luck, uncertainty, probability, human error, risk, and decision making when we don’t understand the world”.
Tuesday, October 16, 2018 ... more
 
 
Superinvestors
In 1984, Hermes, the Columbia Business School Magazine, published an article by Warren Buffett, titled The Superinvestors of Graham-and-Doddsville. The piece was based on a speech he gave at the school to mark the 50th Anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis, and opened with the question: Is the Graham & Dodd “look for values with a significant margin of safety relative to prices” approach to security analysis out of date?
Tuesday, October 9, 2018 ... more
 
 
Proof?
A while back MoneyInc.com published a list of 10 facts that they claimed prove you have no reason to be afraid of the stock market. The immediate concern with such a claim, of course, is that any fact that allegedly proves anything is already something to fear. As Samuel Arbesman points out in his book The Half-Life of Facts, facts change all the time.
Tuesday, October 2, 2018 ... more
 
 
Role of luck
“When you look at anything — say the stock market — you see the survivors, the winners; you don't see the losers and you will be likely to misattribute the things that led to winning,” says Nassim Taleb, author of The Black Swan, in a piece at Edge.org. “There is a silly book called A Millionaire Next Door, and one of the authors wrote an even sillier book called The Millionaire's Mind.
Tuesday, September 25, 2018 ... more
 
 
Small caps
Who should consider investing in small caps? The quick answer is everyone (bar the institutions) because while small caps might encompass more risk they also provide the greatest opportunity for spectacular returns. And while it would be foolish to overweight in penny-stocks it doesn’t make sense either not to take a punt on a stock for the sole reason that it trades below a certain price.
Tuesday, September 18, 2018 ... more
 
 
2 things
There are two things that kill most investors: a lack of discipline and over-confidence. A prerequisite for success in most fields is control. The successful artist controls his or her medium to create a work of art. The successful business person has control over employees, production, marketing and sales. But the trader works in an environment over which he has no control.
Tuesday, September 11, 2018 ... more
 
 
Hard to believe
Given that the market reflects expected performance, it’s easy enough to accept that if you want to predict market behaviour this year or next, the economy is essentially irrelevant as the stock market leads the economy, not the other way around. What is more difficult to accept is that even the long term performance of the economy has little impact on the market.
Tuesday, September 4, 2018 ... more
 
 
Questions
"Investing without considering your values is like having the fastest boat in the middle of the Pacific Ocean with no set destination,” says Nick Maggiulli at Cornerstone Research, “no matter how fast you go, you will always feel lost.” Find what you value in life, then tailor it to your portfolio ...
Tuesday, August 28, 2018 ... more
 
 
Re-runs
Charlie Munger, the vice chairman of Berkshire Hathaway, advices students to cultivate multidisciplinary thinking. “I went through life practicing the multi-disciplinary approach,” he tells them, “and that made it more fun, more constructive, and it made me enormously rich.”
Tuesday, August 21, 2018 ... more
 
 
Is the Market a con?
A con is an intentional deception to cause a person to give up property or some lawful right. Con games are crimes of persuasion and deception. The victim always trusts the swindler in some way.
Friday, August 17, 2018 ... more
 
 
Bear Markets
Bear markets often start with a sharp, swift decline. Resulting in an oversold bounce that retraces a portion of that decline. After which the decline continues, but at a slower pace, as the fundamentals deteriorate.
Tuesday, August 7, 2018 ... more
 
 
AltX
The willingness to do things differently may be an essential ingredient for success in the stock market. So that while most investors are invariably looking for something to do an alternate approach may to look for sufficient reason not to do anything. Besides, as hedge fund manager David Tepper likes to say, having a “too hard pile” is such a huge advantage in life.
Tuesday, July 31, 2018 ... more
 
 
Who to trust
Assessing the quality of management, in particular the extent to which they can be trusted to put the shareholders’ interests above their own, is more an art than a science, and each investor has to find his or her own way of doing so.
Tuesday, July 24, 2018 ... more
 
 
Advice
Let’s face it, when it comes to investing everyone’s in it for themselves. If those who make a living selling, mentoring, coaching, writing and such tell you your stock is going up (or down) in price, you have absolutely no reason to believe them.
Tuesday, July 17, 2018 ... more
 
 
Don't know
Don’t catch a falling knife is a well-known maxim in the stock market. It’s good advice too. Many an investor that’s rushed in to buy into a company whose share price is tumbling has regretted the decision.
Tuesday, July 10, 2018 ... more
 
 
Beta, etc.
For investors, that means a careful focus on broad diversification (to limit the impact of errors), significant reliance on beta (because we will be wrong a lot), fees and costs (because they compound relentlessly whether we’re right or wrong), as well as portfolio ballast and clear execution rules (to try to guard against our tendency to be impulsive), while avoiding single points of failure.
Tuesday, July 3, 2018 ... more
 
 
Cash
“Ask an Englishman how wealthy someone is, and you’re likely to hear a response like, ‘He’s worth 20,000 per year,’ says William Bernstein. “This sort of answer usually confuses the less sophisticated, but it is an estimable response, because it says something profound about wealth: it does not consist of inert assets but, instead, a stream of income.
Tuesday, June 26, 2018 ... more
 
 
3 myths
Cullen Roche at Pragmatic Capitalism has written a number of articles that challenge several myths about investing. Including the myths that investors in the stock market are in fact “investing”, that the stock market is a place you go to get rich and, that you need to beat the market.
Tuesday, June 19, 2018 ... more
 
 
Not to be missed
A few things you might have missed last week: From the Economist, a case for owning euro-zone shares; from Bloomberg, Bernanke’s warning that the U.S. Economy faces a ‘Wile E. Coyote’ moment in 2020; from the Institute of New Economic Thinking a warning from Jim Chanos that we can expect more financial fraud, and; a reminder from Morgan Housel at Collaborative Fund.
Tuesday, June 12, 2018 ... more
 
 
Hard to face
Hard things for investors to deal with: New things, experts, optimism, chaos, emotions, the unexpected, being wrong, reality and indifference.
Tuesday, June 5, 2018 ... more
 
 
Turning quant
A question we should all be asking ourselves is whether we have the know-how to properly deal with risk. When it comes to knowing how much to bet on an outcome, for example, how many of us can come up with an answer?
Tuesday, May 29, 2018 ... more
 
 
Looking back
In the first week of April 2000 some 8.4m shares in Scharrig Mining changed hands at between 14c and 15c a share. In November that year the company embarked on a share buy-back programme at more than twice that price. If our April buyers were among the sellers they would have been pleased with themselves, having doubled their money within a few months.
Tuesday, May 22, 2018 ... more
 
 
Mental models
In a famous speech in the ‘90s, Charlie Munger explained his approach to gaining practical wisdom. “The first rule,” he said, “is that you've got to have multiple models because if you just have one or two that you're using, the nature of human psychology is such that you'll torture reality so that it fits your models, or at least you'll think it does.
Tuesday, May 15, 2018 ... more
 
 
Against bubbles
“If betting against bubbles, do it carefully,” warns John Authers at the Financial Times. “Note that this means departing from the “Invisible Hand”, as fund managers, who make up the vast majority of capital in stock markets, would follow their own interests, and not those of the clients whose money they are investing.
Tuesday, May 8, 2018 ... more
 
 
Simple & low risk
Joel Greenblatt has published several books on value investing. The Big Secret for the Small Investor published in 2011, was described by the Financial Time as The best book on the subject in years.It should be mandatory reading for all serious investors says Bruce Greenwald. So, to that end ...
Tuesday, April 24, 2018 ... more
 
 
Market animals
Stock market analysts, commentators and other pundits have come to rely on the traits of familiar animals to describe the different “species” of market participants and capture the “animal spirit” that drives them – albeit, not always in the right direction.
Tuesday, April 17, 2018 ... more
 
 
Hard truths
Some things that may be hard for investors to hear:If you think you’re contrarian, you’re much like everyone else. Your eyes might not lie, but your brain certainly does. Try as you might, you probably won’t beat the market. The Market is always right. And the best oil exploration deals never get sold outside of Texas.
Tuesday, April 10, 2018 ... more
 
 
Where next?
This was the quarter when investors were reminded that stocks don't go up forever. Some of the optimism that has carried the U.S. market higher and higher came to an end in the last three months. It was a turbulent quarter that featured two one-thousand-point Dow plunges, powerful rallies and a growing sense of fear among investors.
Tuesday, April 3, 2018 ... more
 
 
machine learning
There is a lot of buzz around the emerging technologies of artificial intelligence and machine learning — so much so that these terms often get used interchangeably. Even “robotics” gets thrown in the mix. But what does each really mean, and how are they related?
Tuesday, March 27, 2018 ... more
 
 
Can't sleep
Things they’ve said that keep me awake at night: There is nothing new in Wall Street; You are the easiest person to fool; your own thoughts are not your own, and; he who lives by the crystal ball soon learns to eat ground glass.
Tuesday, March 20, 2018 ... more
 
 
Q & A
Q: Why is stock market investing so difficult? A: [Because] it mixes high stakes with strong emotions, intelligence with luck, and long-term innovation with short-term trading. – Morgan Housel.
Tuesday, March 13, 2018 ... more
 
 
Reminders
Austin Edwards, writing in the Motley Fool, noted that whereas most of us turn to sulking, worrying, and even panicking when things go sour, the tougher, smarter, and more successful people do something different when things go wrong: “They learn from it. And that's what sets them apart.”
Tuesday, March 6, 2018 ... more
 
 
Magic formula
If someone offered you a magic formula for making ‘easy’ money in the market, would you use it? Would you even bother to look at it? Or, would you look at it and try to improve on it?
Tuesday, February 27, 2018 ... more
 
 
Ad hoc explanations
An Ad hoc explanation isn't an explanation. It’s a way of coming up with a story that “fits” what’s happened, usually without any evidence that it's correct.
Tuesday, February 20, 2018 ... more
 
 
Sitting in cash
In hindsight, sitting in cash waiting for a correction wasn’t the smartest thing you could have done over the last few years. But that’s with the benefit of hindsight. As the saying goes, good decisions can lead to bad outcomes and poor decisions to good outcomes.
Tuesday, February 13, 2018 ... more
 
 
Cryptos crash
Schadenfreude - the pleasure or self-satisfaction that comes from learning of or witnessing the failure or humiliation of others – is something many a “wise” investor will have experienced as the cryptocurrency market came crashing down last week.
Tuesday, February 6, 2018 ... more
 
 
At Davos 2018
Scott Minerd the investment chief at $242 billion Guggenheim said in a letter from Davos that he’s troubled by the euphoria. “Two years ago, when I last attended, a growing consensus saw the global economy at the brink of recession,” wrote Minerd. “Stocks had sold off, and many pundits predicted that we were at the brink of a new bear market...
Tuesday, January 30, 2018 ... more
 
 
From...
… Stanley Druckenmiller:

”It takes courage to be a pig.”

I’m here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.
Tuesday, January 23, 2018 ... more
 
 
Extracts
Adapted extracts from last year’s Q2 & Q3 Hedge Fund letters that might impact on your thinking for 2018 … From IP Capital Markets: “Among the companies with the highest share price increases in the past twelve months, we unsurprisingly notice a predominance of … businesses which delivered historically low margins and returns.
Tuesday, January 16, 2018 ... more
 
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